Correlation Between ARK Genomic and Fidelity MSCI

Can any of the company-specific risk be diversified away by investing in both ARK Genomic and Fidelity MSCI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ARK Genomic and Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARK Genomic Revolution and Fidelity MSCI Health, you can compare the effects of market volatilities on ARK Genomic and Fidelity MSCI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ARK Genomic with a short position of Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARK Genomic and Fidelity MSCI.

Diversification Opportunities for ARK Genomic and Fidelity MSCI

0.82

Correlation Coefficient

ARK Genomic  Fidelity MSCI

Very poor diversification

The 3 months correlation between ARK and Fidelity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ARK Genomic Revolution and Fidelity MSCI Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Health and ARK Genomic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ARK Genomic Revolution are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Health has no effect on the direction of ARK Genomic i.e., ARK Genomic and Fidelity MSCI go up and down completely randomly.

Pair Corralation between ARK Genomic and Fidelity MSCI

Given the investment horizon of 90 days ARK Genomic Revolution is expected to under-perform the Fidelity MSCI. In addition to that, ARK Genomic is 3.06 times more volatile than Fidelity MSCI Health. It trades about -0.17 of its total potential returns per unit of risk. Fidelity MSCI Health is currently generating about -0.05 per unit of volatility. If you would invest  6,880  in Fidelity MSCI Health on February 28, 2024 and sell it today you would lose (153.50) from holding Fidelity MSCI Health or give up 2.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ARK Genomic Revolution  vs.  Fidelity MSCI Health

ARK Genomic Revolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARK Genomic Revolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Etf's forward-looking signals remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Fidelity MSCI Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity MSCI Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Fidelity MSCI is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK Genomic and Fidelity MSCI

The main advantage of trading using opposite ARK Genomic and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK Genomic position performs unexpectedly, Fidelity MSCI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity MSCI will offset losses from the drop in Fidelity MSCI's long position.

The idea behind ARK Genomic Revolution and Fidelity MSCI Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.